Busy times for bankruptcy lawyers
By Katie RyanInside Tucson Business
Much like the proverbial elephant in the room, bankruptcy is something that is thought about, but seldom discussed. According to U.S. Bankruptcy Court statistics, the number of bankruptcy filings rose by nearly 40 percent from 2006 to 2007. While many local businesses are feeling the toll of the sluggish economy, business is booming for bankruptcy lawyers.
“Normally I’m setting up businesses, and right now, nobody is opening any,” said bankruptcy attorney Lisa Thompson. “So I started doing consumer bankruptcy here in Tucson. I know I could be busy every day with consultations, but it got to a point where I won’t do more than eight consults a day.”
In 2007, Thompson opened a practice in Las Vegas, called Bankruptcy Law Center. Since moving to Tucson in December, she continued to work in bankruptcy because everything else was slowing down.
“The economy hits attorneys in law,” Thompson said. “When people can’t pay, people aren’t litigating.”
According to Arizona bankruptcy statistics, in 2000 there were 20,955 bankruptcies filed. In 2005, the number nearly doubled to 40,214.
Along with bankruptcies, foreclosures are currently at an all-time high. According to a report by the Mortgage Bankers Association, more than 900,000 homes are in the foreclosure process across the country, up 71 percent from last year.
With home mortgages and credit card debt, some people see bankruptcy as one solution.
“In situations like the ones I see, you’re not going to dig yourself out unless you win the lottery,” said Thompson. “Declaring bankruptcy allows you to have a fresh start.”
It may be a fresh start for some, but there are different types of bankruptcy.
Chapter 7 bankruptcy is commonly referred to as liquidation because individuals collect their belongings and sell them in order to pay off their creditors. However, the reality is, selling property from an individual’s estate doesn’t always eliminate their debt.
“I might have paid a lot for an item, but you’d give me $5 for it at a garage sale,” Thompson said. “Most people don’t have the Hope Diamond just sitting around.”
The most recognized form of bankruptcy for individuals is Chapter 13, where people come up with a five-year-plan on how they’re going to pay off their debt. Chapter 13 is most widely known because people are able to keep assets such as their house or car if it falls under the exemption.
According to state and federal exemption tables, individuals filing Chapter 13 in Arizona are able to keep $150,000 equity in their house and can have a car worth up to $5,000 among other personal property.
The exemption table “is a guideline,” Thompson said. “Go and talk to a bankruptcy attorney if you’re in distress. I think for the most part, people are horrified when they file for bankruptcy. I hear it all the time. People will tell me, ‘I’ve always paid my debt, but my kid got sick,’ or ‘I lost my job or I’m upside down on my house.’”
William C. Seiffert, an attorney who has practiced law for more than 20 years, sees the information his clients get from surfing the Web.
“There’s a lot of misinformation out there on the Internet and on television,” he said. “There are a lot of dishonest people who prey on individuals when they are at their weakest.”
One way to keep from going down the slippery slope of declaring bankruptcy is to be educated about it. Thompson, for example, urges people to read the fine print on any applications for credit cards or loans.
“I’m a big proponent of education,” she said. “People are so scared of bankruptcy that they won’t go out and learn about it.
Katie Ryan is a Tucson-based freelance writer.